Do High Taxes Really Hurt Some NHL Teams?

A recent report published by the Canadian Taxpayers Federation claims higher taxes in the provinces of Ontario and Quebec put the Toronto Maple Leafs, Ottawa Senators and Montreal Canadiens at a disadvantage when pursuing free agents.

The report also claims the Vancouver Canucks, Edmonton Oilers and Calgary Flames benefit from the lower tax rates in British Columbia and Alberta.

No word in the Toronto Sun article about where the Winnipeg Jets sit on this list. One assumes they’re in the middle of the pack of the 30 NHL teams.

“The numbers don’t lie; NHL players take a financial hit to play in Ontario, Quebec, California, New York and New Jersey,” said former Junior A goaltender, Senators fan, paper author and CTF Research Director Nick Bergamini.

The CTF paper also shows that Canada’s eastern teams will be at a major disadvantage in the 2014 unrestricted free agency market. Signing with the Sens, Leafs or Habs will mean millions in lost wages for upcoming UFAs like Henrik Lundqvist and Joe Thornton. Recent tax hikes on high income earners in Quebecand Ontariowill only make playing in these provinces a tougher decision.

Could higher taxes in Toronto & New York drive away NHL free agents?

Higher tax rates can affect a team’s ability to sign free agent stars, but the quality of each market and the reputations of the franchises are bigger factors.

For example, the cost of living in/around New York may be high, but the Rangers over the years have had little difficult signing big name free agent talent. Taxes won’t be an issue for Henrik Lundqvist if, as expected, he re-signs with the Blueshirts.

The same goes for Joe Thornton and the San Jose Sharks. Thornton loves California, and state taxes haven’t prevent him from twice re-signing with the Sharks.

High taxes certainly hasn’t prevented former Stanley Cup champions like the LA Kings and Anaheim Ducks from acquiring and retaining their best players.

At the turn of this century, the Maple Leafs had little difficulty attracting big name free agents to Toronto. Ontario taxes were likely still high thirteen years ago, yet when the Leafs were considered potential Stanley Cup contenders, free agents (usually Ontario-born) regularly beat a path to their door.

The Leafs subsequently went into a seven-year playoff drought which they’ve only now just emerged, but remained the wealthiest franchise in the league. Should they continue to improve on the ice, one assumes higher taxes won’t hurt their efforts to bid competitively for free agent stars. It certainly didn’t prevent them from landing free agent winger David Clarkson this summer.

Language and the pressure of playing in arguably hockey’s most demanding professional market hurts the Canadiens as much, if not more, than higher taxes.

The Senators have for year had tighter payrolls than most NHL teams. In the few years they have spent big, it was on re-signing their own stars. Higher taxes didn’t prevent them from re-signing some of their best players over the years, like Jason Spezza, Dany Heatley, Daniel Alfredsson and Erik Karlsson

While the Oilers and Flames play in markets with the lowest taxes in Canada, they’ve actually had greater difficulty attracting free agent talent. Largely because of the Oilers location as the NHL’s northernmost franchise, they have the dubious reputation of being the least desirable destination for NHL players.

The New Jersey Devils tightfisted reputation for eschewing expensive free agent talent (Ilya Kovalchuk the lone exception), not higher taxes, is the reason few free agent stars sign with them.

The city of Detroit is a bankrupt shell of it former glory, yet the Red Wings remain among the most respected and desirable franchises among NHL players. Only the salary cap limits the Wings in the free agent market.

The Phoenix Coyotes may be in a low-tax market, but years of uncertainty over their future in Arizona while operating on limited budgets hasn’t made them a destination of choice for NHL stars.

Rising taxes could become a growing factor over time for NHL players, but the quality of the respective markets and the reputations of the franchises should remain the determining factors in deciding their destinations..

4 Comments

The Flying V
on September 26, 2013 at 7:22 pm

Ontario is bankrupt and their solution to getting out of it is to bankrupt everyone who lives here through taxes!

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